Banks Warn of Loan Suspension for Public Sector Workers Over Arrears

The Ghana Association of Banks (GAB) is considering stopping new loans to public sector workers because of delays in transferring loan repayments deducted from their salaries to the banks.

The association says the problem could force banks to suspend new loans in the coming weeks if the outstanding payments are not made.

Speaking at the association’s 43rd Annual General Meeting in Accra, its Chief Executive Officer, John Awuah, said banks were struggling to cope with the delays, which have continued for more than a decade.

He explained that workers, including teachers, nurses and doctors, have already had their loan repayments deducted from their salaries. However, the Controller and Accountant-General’s Department (CAGD), which processes their salaries, has delayed transferring the money to the banks.

According to Mr. Awuah, banks were waiting for three months of outstanding payments as of October, making it difficult for them to manage their finances and continue giving out loans.

He said the association had previously considered stopping loans over the same problem but held back after the Ministry of Finance promised to help resolve the issue.

Mr. Awuah warned that banks could no longer continue bearing the cost of the delays, especially as the Bank of Ghana is pushing them to reduce the number of loans that are not being repaid properly.

He also said unpaid loans were a major concern for banks because they affect profits and make it harder for them to lend more money.

The proposed suspension would affect new loans, meaning public sector workers could find it difficult to secure fresh loans from banks if the situation is not resolved.

The Ghana Association of Banks is therefore calling on the CAGD to transfer the outstanding money to prevent the suspension and allow public sector workers to continue accessing loans.